Adirondack Corporation is estimating activity costs associated with producing two different sized e-reader tablets. The indirect labor can be traced to three separate activity pools. The budgeted activity cost and activity base information, along with the estimated activity-base information, is provided below. All work must be shown for credit

		Activity Cost			Activity Base
Purchasing		$ 300,000			Number of purchase orders
Materials handling		500,000			Number of moves
Production		1,500,000			Machine hours
TOTAL $2,300,000
	Number of Purchase Orders		Number of Moves	Machine Hours		Number of Units
7 tablet	4,000		1,200	2,000		2,000
10 tablet	4,000		800	8,000		3,000
TOTALS	8,000		2,000	10,000		5,000

A) Determine the Activity rate for each activity cost pool.

Answers:

Purchasing

Materials handling

Production

B) Complete the following chart to determine the total indirect labor allocated to each UNIT under the ABC model.

	A	B	C	D	E	F	G
1		7 inch tablet			10 inch tablet
2	Activity	Activity-Base Usage	Activity Rate	Activity = Cost	Activity- Base Usage	Activity Rate	Activity = Cost
3	Purchasing
4
5
6
7
8	Activity cost per tablet

C) If traditional costing had been used and number of units were the allocation base, what would the single allocation rate be?

D) Given your answers in parts (B) and (C), which method would you suggest to management, ABC or a single allocation rate? Please explain your decision